An unthinkable absent-mindedness in Equity Master
On May 7, 2015, the Equity Master introduces
us, readers, with Charles Thomas Munger, the celebrated “partner” of Warren
Buffet and Vice-Chairman of Berkshire Hathaway
Corporation, in their article "Did Charlie Munger Just Turn India's Economics Upside Down?". Mr Munger is considered to be one of the greatest philanthropists
in the USA. In
2014 he donated over $65 million dollars in
stocks to UCSB (University of California, Santa Barbara campus) for arranging
regular meeting of Physicists, their stay and related expenditures. He
considers that if physicists get chances to interact among them science can
develop better, new ideas can generate, as happened in some cases 100 years
back in West Europe.
But what makes Mr
Munger more renowned is something different. Along with Buffet, Mr Munger,
popularly known as Charlie, are among the topmost investment wizards of the
world with some uncanny senses. Charlie shared some of his ‘secrets’ at the
DJCO meeting last March – for example, as Alex Rubalcava
informed us by a tweet: "I did not succeed in life by intelligence. I succeeded because I
have a long attention span." -- Munger $DJCO 10:53 PM - 25 Mar 2015.
But what is that
long attention span? Is that what we call ‘taking the long view’ in common
parlance? Strangely the answer is ‘No’, at maximum we can call it a different way
of decision making. For example Charlie’s ‘long attention span’ taught him that 'Energy Independence' is one
of the dumbest ideas of our times! This bright idea was publicised much
about two years ago. (See for example Business Insider, 24 July, 2013.) He
says: It is always better to import foreign oil and preserve your country’s own
resources.
When Charlie was saying this, that is, in 2013, crude price was sliding
from $115 mark to about $95, both OPEC price and US domestic prices like West
Texas Immediate. But strangely Equity master is telling this in May 2015 when
crude price is just climbing over $60 starting from a more benign $40! What is
the reason of recalling this now! Does Equity Master want to advise that even
if oil prices soar we should continue import increasingly and restrain domestic
production?
India is always dependent on foreign oil, whatever the price is, as the
following graphs will prove: (1) Crude oil Import by India (in $ billion) and
(2) India's Domestic Production and Import of Crude Petroleum in Thousand Barrels/Day or '000 BPD)
These are obvious that
ü India’s oil
use or demand and import are increasing rapidly; in FY 15 already the import is
alarmingly high and
ü India’s
domestic production of petroleum has not been increasing much since 2010.
So? What point does the Equity Master want to hit?
But nonetheless, what is rather alarming, in the whole discussion the point
hovered solely on import vis-à-vis domestic-production of oil substituting
import – and not at all on increasing use of petroleum, GHG emission and
etc resulting hazards vis-à-vis substituting petroleum or fossil fuels,
switching over to renewable and also to low-energy consuming economy
reining consumption.
It is indeed strange. After more than 20 years of Rio summit, after more
than 35 years of Tbilisi conference on environmental education and awareness can
we discuss petroleum import vs. domestic production without mentioning impacts
of our overuse of fossil fuels on nature, global warming, the infamous Delhi
smog and so on and intention of substituting fossil fuels at all – that too in
an article that mentions, in the beginning, about blessings of ‘mother
nature’!
Then, can it be said that the reason of not discussing these salient points
is that we cannot expect all articles should be complete and comprehensive? It
is up to you, the readers, to decide. But we may share our apprehension. Mr
Munger and Mr Buffet are rather climate-deniers. Both in their philosophy
and also in their praxis they do not bother about climate change or global
warming and related ecological problems. We can just look into two evidences
from very recent past, FY 2014-15:
- “I don’t think that when making an investment decision on Berkshire Hathaway, or all companies, that climate change should be a factor in the decision-making process,” Buffett said. [http://blogs.marketwatch.com/thetell/2014/05/05/buffett-sounds-off-on-being-put-in-his-place-climate-change-and-more/]
- US and Chinese companies dominate list of most-polluting coal plants | Warren Buffet-owned Berkshire Hathaway on list of top 25 companies with least efficient and oldest ‘sub-critical’ coal power plants | The Guardian [http://www.theguardian.com/environment/2015/mar/13/us-and-chinese-companies-dominate-list-of-most-polluting-coal-plants]
It would indeed be fateful if one of the
chief business magazines and business advisors, the Equity Master, with its 1.4 million plus
members and millions of readers tilts towards such ungreen business ethics and
practices as upheld by
Berkshire Hathaway. Let us hope our apprehension is
incorrect.
(A version of this was published in Business Economics, June 1, 2015)
(A version of this was published in Business Economics, June 1, 2015)
